Hawaiian Land Co., In re, 4829

• Decision Date: 06 August 1971
• Docket Number: No. 4829,4829
• Citation: 487 P.2d 1070,53 Haw. 45
• Parties: In the Matter of the Tax Appeal of HAWAIIAN LAND COMPANY, Limited.
• Court: Hawaii Supreme Court

Page 1070

487 P.2d 1070

53 Haw. 45

In the Matter of the Tax Appeal of HAWAIIAN LAND COMPANY, Limited.

No. 4829.

Supreme Court of Hawai'i.

Aug. 6, 1971.

Syllabus by the Court

1. Findings and decisions of the Tax Appeal Court are to be sustained unless they are shown to be erroneous and the burden of proof is upon the appellant.

2. By merely proving mistakes of judgment by a government official, one has not shown invidious discrimination to support his claim for denial of the equal protection of the laws.

3. A classification, though discriminatory, is not arbitrary nor violative of the equal protection clause of our Federal and State Constitutions if any state of facts reasonably can be conceived that would sustain it.

4. One who assails the constitutionality of a classification as violative of the equal protection clauses of our Federal and State Constitutions must prove that it does not rest on a reasonable basis and that it is an invidious discrimination.

5. Even though an appellate court generally will reverse a judgment only on a legal theory presented to the trial court, appellate courts will deviate when justice requires.

6. Under HRS § 232-13 (1968) the jurisdiction of the Tax Appeal Court is defined by the assessment and valuation in dispute.

7. The scope of valuation and assessment as sued in HRS § 232-13 is determined by HRS §§ 246-43, 246-44, amending RLH §§ 128-27, 128-28 (1955), which provides for notification and recordation of the valuation contained in the assessment.

8. Under RLH §§ 128-27, 128-28, as amended, HRS §§ 246-43, 246-44 (1968), the legislature intended the total value of real property, both land and buildings, to comprise the valuation for the notification and recordation of the assessment.

9. HRS § 232-3 does not violate the due process clause of our Federal and State Constitutions because this section does not deny a taxpayer his right to appeal the assessor's assessment; but it limits the authority of the reviewing body to amend, modify or vacate the assessment by the assessor. The legislature, in the absence of a constitutional provision, has complete control over the remedy of appeal and may, in its discretion, grant or take away the remedy and prescribe in what cases, under what circumstances, and in what manner, appeals may be taken.

10. Under HRS § 232-3(1) assessment means the percentage of fair market value the assessor values land under HRS § 246-2, for to hold otherwise woule render HRS § 232-3 useless and it cannot be presumed that the legislature intended to enact an unnecessary statutory amendment.

11. Since HRS § 232-3(1) requires that the assessor's original assessment may not be reduced unless the assessment of the property (70 per cent of fair market value) was in excess of its 100 per cent fair market value, the original assessment of $17,054,100 could not and should not have been reduced.

Tany S. Hong, Deputy Atty. Gen. (Bertram T. Kanbara, Atty. Gen., Honolulu, with him on the briefs), for appellant, cross-appellee.

Tobias C. Tolzmann, Honolulu, for appellee, cross-appellant.

Before RICHARDSON, C. J., MARUMOTO, ABE and LEVINSON, JJ., and OGATA, Circuit Judge, in place of KOBAYASHI, J., disqualified.

ABE, Justice.

As of January 1, 1963 the Assessor valued and assessed Ala Moana Center as follows:

                Building  $ 7,321,300
                Land        9,732,800
                          -----------
                          $17,054,100
                

On the other hand, Hawaiian Land Company, Ltd. ('Taxpayer') claimed the following values were applicable to Ala Moana as of the same date:

                Building  $ 6,930,000
                Land        7,274,000
                          -----------
                          $14,204,000
                

Thus, Taxpayer appealed to the Board of Review alleging the Assessor committed numerous errors that would allow assessment to be lowered under provisions of HRS § 232-3 (1968). ¹ Forthwith the Board determined the proper assessment to be:

Thereupon, the Assessor amended the assessment by inserting those amounts in place of the original. Taxpayer appealed this decision to the Tax Appeal Court for a trial de novo. There, though the Tax Appeal Court did not find illegality or unconstitutionality in the Assessor's methods under subsections (2) or (4), nevertheless it lowered the amount of the assessment to:

                Building  $ 6,831,104
                Land        7,588,896
                          -----------
                          $14,420,000
                

The Assessor appealed this judgment and the Taxpayer cross-appealed.

For convenience and easier understanding of the case, first we shall consider some of the issues raised by the Taxpayer's cross-appeal; second, the issues raised by the Assessor's appeal; and third, the remaining issue raised by the Taxpayer.

I.

The Taxpayer's first point in its cross-appeal questions the assessment of its property at 70 per cent of the fair market value and claims the denial of due process and equal protection of the laws in violation of our Federal and State Constitutions.

A.

From evidence based on prices associated with recorded property transactions, the Tax Appeal Court found that 'the average assessment ratio for Oahu on January 1, 1963 was 58 per cent of the sale price.' However, the court also found that 'the Assessor has nevertheless consciously sought to apply a fixed rate of 70 per cent and is not otherwise guilty of intentional discrimination.' Predicated on this latter finding, the Tax Appeal Court concluded that though there were discrepancies in the assessment ratios, there was no 'intentional violation of the essential principle of practical uniformity' and no violation of the equal protection clauses.

In the evaluation or appraisal of land, it must be recognized that at best the estimated value of any parcel of land is the considered opinion of individuals. Frankly, it is nothing more than an 'educated' guess. Thus, for land appraisal, it is unreasonable to expect the exactness contended for by the Taxpayer because as it has been noted the evaluation of land is not in the field of exact science as the Taxpayer attempts to ahve this court believe. We believe that this factor is substantiated by the testimony of six expert witnesses called by the Taxpayer to evaluate the land and each of them arrived at a different figure. In fact, one of the witnesses submitted two different figures as value for the land (see footnote 14 infra).

Also, the tax year 1963, involved here, was during a period of tremendous economic growth within the State of Hawaii, following its admission into the Union of the United States of America. With this rapid growth of our economy, land prices soared. This rise or appreciation of the prices of land was further accentuated by speculative purchasers. Thus, it is logical and reasonable that based on sales prices, in 1963 the assessments of parcels of land would be less than 70 per cent of the sales prices. It is natural for assessment to lag behind the sales prices in such period of rapid economic growth. Therefore, it would be reasonable to surmise that if the subject land had been offered for sale in 1963, it could have been sold for considerably more than $24,363,000 (assessment of $17,054,100 brought up to 100 per cent of the fair market value). Then, subject property also may not have been assessed at 70 per cent but at some lesser ratio of the sale price.

We are aware that H.R.C.P. Rule 52(a) is not applicable in this case; however, we have said findings and decisions of the Tax Appeal Court are to be sustained unless they are shown to be erroneous, and the burden of proof is upon the appellant. Tax Appeals, Maenaka, 41 Haw. 141 (1955); Re Taxes Onomea Sugar Co., 25 Haw. 278 (1920); Re Taxes Waiakea Mill Co., 24 Haw. 333 (1918). In Re Taxes Bishop Estate, 33 Haw. 149, 159 (1934), we said 'that the findings of a tax appeal court are entitled to great weight; that where such findings depend upon the credibility of witnesses and upon the weight of conflicting statements of witnesses, such findings are to be accorded the same weight as the findings of a circuit judge at chambers.'

It appears that the Taxpayer's contention is that the finding is clearly erroneous because of its proof in form of studies that other parcels of land according to sales record were on the average assessed at 58 per cent of the sales prices. Though the studies may show that parcels of land studied were assessed on the average ratio of 58 per cent of the sales prices, it does not mean that the Assessor did not in good faith and within his capabilities estimate the fair market value of those parcels and assess them at 70 per cent of such value. The studies merely show that the sales prices for those parcels were higher than the Assessor's estimated fair market value.

We recognize that such studies may have probative value; however, it is not sufficient to show that the finding of the Tax Appeal Court on this issue is erroneous. In Re Taxes Ewa & Waialua, 47 Haw. 41, 50, 384 P.2d 287 (1963), we said: 'An erroneous assessment is not established merely because other property has been assessed too low if the tax commissioner has acted in good faith and if other property in general has not been assessed at a lower rate.'

B.

Also, it seems that the Taxpayer's contention is that by showing these alleged discrepancies it has met the burden of proving invidious discrimination condemned by the equal protection clause. We disagree.

We believe that the equal protection clauses of our Federal and State Constitutions do not dictate the Assessor to accomplish the impossible task of having each parcel of land within the State of Hawaii assessed at absolute 70 per cent of its fair market value.

Now, assuming that Taxpayer has shown discrepancies in assessment of different parcels of land, at the most it has proven mistakes of judgment. However, that is not sufficient to prove invidious discrimination because 'mere errors of judgment by officials will not support a claim of discrimination. There must be something more-something which in effect...